Sample Management Accounting Report Essay

1345 Words May 8th, 2008 6 Pages
TABLE OF CONTENTS
CONTENTS PAGE
Abstract 2
1.0 Introduction 3
2.0 Analysis of the results 4
2.1 Allocation and Apportionment
2.2 Overhead Absorption Rates
2.3 Cost Determination
2.4 Pricing for Potential Orders
2.5 Profit Analysis
2.6 Sensitivity Analysis 2.6.1 Scenario 1: Increase/Decrease in
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The average price rose to 6% and average profits soared to a significant 58%. Vice-versa, a decrease in 5% of current profits resulted in a fall in average price of 5.3% and a great plummet in average profits of 53%. Hence, it is not advisable to decrease current profits. 2.6.4 Brief Summary From the computations above, there is little change in the price and profits in scenario 1 and scenario 2. As not much amount is affected, it is concluded that both scenarios are not sensitive to the changes in Direct Materials and Direct Labour costs. Conversely, this is different in scenario 3 altogether. A slight change in profits will affect the total profits in a significant amount. Therefore, scenario 3 is very sensitive to changes and would affect the company’s profit margin tremendously. So, decreasing the profits it not a wise decision.

3.0 Conclusion
3.1 Issues
There were certain issues concerned in allocating the overheads. In the Overhead Analysis Sheet, there was no allocation for all four production departments in the Primary Apportionment. Another issue is that power is allocated under the basis of machine hours which actually is supposed to be

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